Solar’s growth spreads beyond California, Southwest

Utility scale solar power accounted for nearly 60% of all new solar capacity in 2017 and for the first time the overwhelming majority, 70%, of the solar plants installed were built outside of the traditional solar power strongholds of California and the Southwest, according to a report released Sept. 13 by the Lawrence Berkeley National Laboratory.

The authors of the report say that trend, combined with the size of the utility-scale solar development pipeline, suggests “continued momentum and a significant expansion of the industry in future years.”

The report, which gathers data from the preceding year, found that 6.2 GW of direct current solar capacity was deployed in the U.S. in 2017. Last year’s solar deployments were 42% below the 10.8 GW DC that were installed in 2016, but 46% above 2015 deployments. The authors attributed the year-over-year decline in 2017 deployments to a surge in deployments in 2016 caused by concerns that the federal investment tax credit was going to expire.

By the end of 2017, the report found that there were at least 188.5 GW of utility-scale solar power capacity in interconnection queues across the country, 99.2 GW of which first entered the queues in 2017.

The solar pipeline is filling up across the nation, but the authors noted the particularly robust growth in locations that previously were not solar hot spots. The central region, for instance, accounted for 27% of the 99.2 GW of solar projects that entered development last year, followed by the Southwest with 19% of the 99 GW, the Southeast with 15% of the total, and Northeast with 12%, while California and Texas each accounted for 11% of the new solar projects.

The wider distribution of solar projects “is as clear of a sign as any that the utility-scale market is maturing and expanding outside of its traditional high-insolation comfort zones,” the authors said.

They noted that with the four states that began their first utility scale solar projects in 2017, two-thirds of the 50 states now have one or more utility-scale solar projects.

The installed price of solar power continued to decline in 2017. LBNL said that median utility-scale photovoltaic prices dropped to $2 per watt in 2017, representing a 60% decline since 2010 and a 15% decline from 2016. The lowest-priced projects in LBNL’s 2017 sample were between $0.9 per watt and $0.6 per watt, with the lowest 20th percentile of projects falling from $2 per watt in 2016 to $1.8 per watt in 2017.

Power purchase agreement prices also continued to decline, according to the LBNL report, falling to below $40/MWh with some as low as $20/MWh. The PPA prices in LBNL’s sample come entirely from utility-scale projects that sell bundled energy, capacity, and renewable energy credits to utilities or other offtakers. The authors also noted that about two-thirds of the contracts in their sample do not escalate over the contract life, meaning that pricing actually declines over time in real dollar terms.

However, the report also notes that as solar penetration increases the value of solar in a wholesale power market can decline. That can be seen in California, the nation’s largest solar market.

In 2012, when solar covered just 2% of load, the hourly generation-weighted average wholesale power price earned by solar was $37.8/MWh, or 125% of the simple average wholesale power price across all hours. Five years later in 2017, with solar at 15% penetration, solar’s energy value was just $25.0/MWh, or 79% of the average wholesale price. That downward trend is likely to continue, say the authors, as solar penetration continues to rise and drive down wholesale power prices.

One way to offset the erosion of the energy value of solar power is to add battery storage to shift a portion of excess mid-day solar generation into evening.

Recent PPAs for solar plus battery storage projects suggest that combination has become significantly cheaper than it was just a year ago, making it increasingly attractive in higher-penetration areas. As a result, solar-plus-storage installations is on its way to becoming the “new normal” in those markets, the report says.

The authors conclude that utility scale solar power is becoming increasingly competitive and that, looking ahead, solar power deployments should enjoy “continued momentum through at least 2023.”